Wednesday, August 15, 2012

Falling behind or leaping ahead?

Article in the NYT today about how social welfare programs in the US are lagging behind the rest of the developed world.

The crux of the argument is "we're richer than they are so we should be able to provide the same programs they do." But the author fails to consider the point that maybe the reason we're richer (approximately 40% richer than other developed countries) is because we don't have those programs. Yes our unemployment insurance is less generous, but too much unemployment insurance creates a disincentive for people to get jobs and produce. Yes our health care system excludes millions of people, but universal health care leads to mis-allocation of resources and over-consumption of health care. We haven't necessarily made the right choices on these issues because citizens in each country collectively decide what's right for themselves. But so far we've chosen that we want to be richer and freer (on average) and consequently less equitable than other developed countries. The argument that "the rest of the world makes different choices" isn't a sufficient reason for change. I certainly agree that alleviating human suffering should be a big priority for the country but everything comes with a cost (debt, taxes, lost productivity etc) and if that cost means hundreds of thousands of lost jobs and lower incomes (i.e. becoming more like Italy) then I'm not sure that we would be better off with more social welfare programs.

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